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The government claims it thought debts raised by its robo-debt scheme were legal. But experts now point to two cases that went before the High Court and clearly highlighted the program’s risks. By Rick Morton.

Robo-debt shonky from the start

Minister for Government Services Stuart Robert with Prime Minister Scott Morrison.
Credit: Sam Mooy / Getty Images

As the government awaits a decision about whether its $1.2 billion robo-debt settlement offer will be accepted by the Federal Court, legal experts say the Coalition had ample warning the scheme was illegal from the start.

They point to two legal precedents: the Poniatowska and Keating cases. The first related to a largely forgotten welfare “fraud” blitz under the Gillard government, which was sensationally shut down by the High Court in 2011. The second was a 2013 case in the same court that threw out the Commonwealth’s retrospective legislation. Both would or should have been briefed as a risk to the Coalition government when its robo-debt program was being developed.

The ripple effect of these two cases – which found the federal government had no legal basis before 2011 to prosecute welfare debts where a Centrelink customer had not updated their income – is still being felt today. There are some 15,000 people whose convictions are unsound or have since been overturned.

It’s been more than 12 months since the Morrison government finally suspended the robo-debt program, after three years of denying there were any problems with the scheme. Department of Social Services secretary Kathryn Campbell has repeatedly said there was an “assumption” within the government that the debts raised were legal.

On the same day as the program was suspended, November 19, 2019, general counsel for the Australian Taxation Office (ATO) Jonathan Todd wrote to the tax commissioner, Chris Jordan, informing him: “[Department of Social Services] have advised you that they have received legal advice that debts based solely upon DSS’s own income averaging of ATO annual tax data are not lawful debts.”

As such, the question remains: when did the Commonwealth know about the illegality of these debts?

The Saturday Paper asked both DSS and Services Australia whether the Poniatowska or Keating cases were raised in memos or briefs at any stage during internal deliberations within the public service regarding the online compliance intervention (OCI), or in advice to ministers.

“It would be inappropriate to comment on or disclose any legal advice with respect to these two cases, as it is covered by legal professional privilege,” a spokesperson responded.

But staff remember them.

As one senior Services Australia employee told The Saturday Paper earlier this month, “Ah, the Poniatowska case. I know it well.”

 

The Poniatowska and Keating decisions sent shock waves through the then Labor government. Within a year, the number of welfare fraud prosecutions, which had essentially been automated with form letter briefs of evidence sent to the Commonwealth Director of Public Prosecutions, halved.

However, at the time, only a handful of the 15,000 people with convictions rendered unsound by the judgements were actually told by the then Department of Human Services. And that was only because they were facing court or in the pipeline for prosecution. One man, jailed over his debt, was released.

“We used to just prosecute, prosecute, prosecute,” Janice, the pseudonym of a senior Centrelink investigator, told researcher Dr Scarlet Wilcock in regards to the Labor scheme. “Quite frankly, it used to be about a number, it used to be about a benchmark.”

Dr Wilcock, a lecturer at the University of Sydney school of law, analysed this program for a 2019 paper, published in The British Journal of Criminology. Wilcock found internal performance targets for fraud investigators led to them prioritising “easy” convictions over complex cases so they didn’t get bogged down in lengthy administrative checks.

“Serious and complex cases, which were more time-consuming and onerous to investigate, were frequently abandoned, delayed or met with an administrative response instead of criminal investigation,” Wilcock writes.

“At the same time, Centrelink’s ‘prosecution-first’ mentality appears to have licensed overzealous investigative tactics on the part of some investigators, raising concerns about Centrelink’s compliance with its investigative standards.”

Wilcock cites anecdotal evidence that some investigators would intentionally delay acting until a person’s debt edged above the $5000 threshold. “This enabled the investigator to initiate a fraud investigation, which contributed to his or her quantitative investigation KPIs [key performance indicators],” she writes.

When the Labor system came crashing down, the two legal precedents sounded a warning to bureaucrats and government ministers alike.

“It is important to ask questions about how well-resourced government departments effectively bookended a decade with two landmark legal defeats marked by horrendous human consequences,” says Dr Darren O’Donovan, a senior lecturer in administrative law at La Trobe University.

“The Poniatowska and Keating matters were a warning to the Department [of Social Services] about the danger of stepping to the edge of your legal authority. Yet when we get to robo-debt we see the same institution again dancing on the precipice with $2 billion tucked under its arm.”

He lists the recurrent behaviours: “Acting in a manner unsupported by any tribunal case law, refusing to listen to legal advocates, refusing to test their arguments.”

No one within government, nor the departments responsible for robo-debt, have disclosed precisely what legal advice was sought or when it was sought with regard to the development of the scheme. Government Services Minister Stuart Robert claimed public interest immunity on disclosure of the “cost, timing and provider of legal advice”.

In an August 2020 letter to the chair of the senate community affairs references committee, Rachel Siewert, Roberts wrote, “The claims of the applicants in the class action include a negligence claim for damages. The applicants have said, in public hearings of the litigation, that the legal knowledge of the Commonwealth or Commonwealth officials at particular times would be relevant to determination of these claims.

“Disclosure of this information under these specific circumstances could potentially prejudice the Commonwealth’s position in this litigation.”

If the federal court accepts the government’s $1.2 billion settlement offer for robo-debt victims, it’s unlikely this legal advice will become public.

Services Australia notes in a statement that the Poniatowska and Keating High Court cases were fought on a different legal test – so-called “omission” offences – whereas the robo-debt class action was especially focused on the unlawful use of ATO annual income averaging data to raise debts, without the necessary fortnightly pay information from a person’s employer.

But the legal challenges to both the Labor and Coalition systems go directly to the heart of government power, and even at the very beginning of robo-debt there were questions about whether there was a legal basis for the Coalition to do what it proposed to do.

What little we do know about risks flagged in the original OCI scheme come from documents released under freedom of information after a lengthy battle by digital rights advocate Justin Warren.

A risk management plan for the “employment income matching” robo-debt program, signed in August 2015 by the DHS compliance branch national manager Scott Britton, raises the prospect of major reputational damage to the department and government including “significant breach of the legislation and or judicial enquiry”.

In the same FOI release – covering the period between August 2015 and February 2016 – an open issues summary of the system reveals that “ICT raised concerns of accuracy of the debt calculated if [the] manual step is not included in the [otherwise automated] functionality”.

At the time of this risk assessment, Scott Morrison was Social Services minister.

“The lower level and mid-level bureaucrats would have been aware that things were shonky and it was hard to live with themselves,” Terry Carney, emeritus professor of law at the University of Sydney, tells The Saturday Paper.

Carney, whose appointment as a member of the Administrative Appeals Tribunal was not extended after he handed down an excoriating public decision in 2017 calling robo-debt “unlawful”, says he now realises he was not alone in this view.

“I didn’t know that in Victoria around the same time there were similar rulings by [former AAT member Andrea] Treble, who also wasn’t reappointed. Mere coincidence,” Carney says.

“I remember being so surprised at the illegality [of robo-debt] that I thought I must have been overlooking something.

“There’s often so many things tucked away in the data-matching legislation that nobody ever looks at, you know, in ordinary practice. I thought there must have been something in there that gave them a leg to stand on but, of course, they didn’t have it.”

Carney says the 2011 and 2013 court losses for the Labor government serve as “illustrations of the increasing drift away from principles of executive integrity and government standards of administration”.

But between those significant and embarrassing court judgements and 2015, something changed. Carney has a view as to what.

“In 2015 you’re coming up to an election, you’ve got MYEFO [the midyear economic and fiscal outlook ] due at the end of the year with projections about whether there would or would not be the chance of getting into the black,” he says.

“And so, the minister and the government are worried about how they are going to balance the books and every minister is asked to talk to their departmental secretary and see what bright ideas they’ve got for solving this.”

A former Centrelink compliance officer who worked on the precursor system to robo-debt, which did have manual checks, tells The Saturday Paper that experienced staff knew the pivot to automatic income averaging using a single data source, previously advised against within the department, was wrong.

“When all avenues were exhausted to verify income – for example the customer writing to the employer – then averaging occurred,” the former employee says.

“This did raise a red flag, in experienced staff, as to how can wages be averaged over a 12-month period when it was clear they were only on Centrelink for four months, as an example.”

O’Donovan says robo-debt worked for a time precisely because people were scared of being prosecuted or held in hock for years or decades, even when they had done nothing wrong.

“The lifeblood of robo-debt’s efficiency was fear,” O’Donovan says. “Someone [in government] saw a possible last resort practice that was festooned in warning labels, and tore the labels off to build an 800,000-debt system.

“Figuring out how and why that happened is the only way to stop this happening again.”

This article was first published in the print edition of The Saturday Paper on Feb 20, 2021 as "Red flags to robo-debt bull".

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Rick Morton is The Saturday Paper’s senior reporter.